As you get older, you’ll need to make decisions about everything from retirement investments to the right kind of health insurance. These decisions can be complicated and time-consuming, and Medicare in particular can be challenging to deliberate. Should you choose traditional or go with a ? And how much coverage should you have when it comes to prescription medication?
These and other questions may seem frustrating and overwhelming. But rest assured, choosing a Medicare plan can be accomplished with appropriate research. Whether you’re about to turn 65 and need some information, or you’ve been considering a change in your current Medicare plan, the following 2016 – 2017 Medicare facts guide offers valuable information to help you make a more confident decision.
Eligibility requirements for Medicare
For starters, you need to know when you can apply for Medicare in order to make an informed decision about plan benefits. Eligibility requirements for Medicare are simple. You can enroll in Medicare if:
- You’re 65 or older.
- You meet certain disability requirements.
- You receive benefits from the Social Security Administration (SSA) or the Railroad Retirement Board (RRB).
- You have end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease).
You have an initial window of seven months to enroll in Medicare: three months before your 65th birthday, the month of your 65th birthday and three months following the month you turn 65. After this window closes, you can still enroll in Medicare during the Open Enrollment Period (OEP) or Special Enrollment Period (SEP). However, penalty fees for late enrollment may apply if you enroll during the open enrollment period. We’ll talk about the details of signup windows in another section.
If you’ve been receiving Social Security benefits for 24 months, then you’ll get your Medicare card on the 25th month after receiving those benefits. At that time, you’ll be enrolled in both Parts A and B of Medicare automatically. You’ll need to opt out of Part B if you don’t want to pay for the premiums associated with this portion of coverage.
Part A is free for most people, which is why most people keep Part A, even if they don’t plan to use it regularly. Part B has a standard premium of $121.80 per month in 2016 and covers routine doctor visits, outpatient care and some medical treatments. In 2017, the standard premium is expected to jump to $149 a month for new enrollees. You’ll need to decide whether you need Part B or you can forgo the medical coverage it provides.
People who have ESRD or Lou Gehrig’s disease do not need to meet the age requirements for obtaining Medicare. They will be automatically enrolled in Parts A and B the same month that their disability coverage begins. If you need to sign up for Medicare, then you need to start with the Social Security Administration (SSA), whether you receive benefits already or not. You can apply for Medicare online, via phone or in person at your local Social Security office.
Medicare from A to D
There are four parts to Medicare: Part A, Part B, Part C (Medicare Advantage) and Part D. Medicare Part A covers hospital care while Part B covers medical care. Hospital care might include extended hospital visits, hospice care or stays at assisted living facilities. Medical care includes outpatient treatments, doctor visits and other routine medical services that make up most people’s typical healthcare experiences. It’s important to note that Medicare does not cover certain things, such as:
- Cosmetic surgery
- Dentures and most dental services
- Eye exams for prescription purposes
- Foot care
- Hearing aids or exams related to fittings
- Long-term or custodial care
You’re automatically enrolled in Parts A and B if you receive Social Security, Railroad Retirement or disability benefits or meet certain disability conditions. You have the option to opt out of Part B. If you want additional coverage or more personalized healthcare options, then you’ll need to enroll in a Medicare Advantage Plan as described below. Medicare Advantage Plans are considered Medicare Part C even though they’re sold through private insurers.
Medicare Part D covers prescription medication. You can enroll in a Part D plan as soon as you enroll in Parts A and B. Many Advantage plans include prescription coverage, so there’s no need to enroll in a Part D plan if you have Advantage. If you have traditional Medicare, then you’ll most likely need a Part D plan to cover the cost of prescriptions.
Keep in mind that employer-sponsored healthcare plans also usually cover a portion of your prescriptions. If you have a plan through your employer, then enrolling in a Medicare Part D plan may void the policy that you hold through your job. You’ll need to contact a plan administrator to find out more about Medicare Part D and how it relates to any existing coverage.
Medicare Advantage Plans
If you’re dissatisfied with original Medicare or need supplemental coverage due to increased healthcare concerns, then you might consider buying a Medicare Advantage plan. Medicare Advantage effectively combines Parts A and B and adds drug coverage to become a comprehensive health insurance plan for many people. Medicare Advantage plans are offered in different types, including:
- Health Maintenance Organizations (HMO)
- Medicare Medical Savings Account (MMSA) Plans
- Preferred Provider Organizations (PPO)
- Private Fee-for-Service (PFFS) Plans
- Special Needs Plans (SNPs)
There are benefits and drawbacks to choosing a Medicare Advantage plan. For example, beneficiaries of an HMO are limited to doctors and providers within their plan’s range unless it’s an emergency. This could cause some issues down the road, like preventing you from seeing your established primary care doctor. On the other hand, PFFS Plans allow you to see any provider who agrees to accept your plan. Other benefits to choosing a Medicare Advantage plan include greater flexibility in coverage and more convenient cost options. Medicare Advantage plans are sold via private insurers that contract through Medicare, and premiums vary.
We’ll outline the enrollment periods for Medicare in a subsequent section. But here, we’ll point out that you can only change to an Advantage plan from a traditional Medicare plan during certain times in the year; however, you can enroll in an Advantage plan at the beginning of your initial eligibility. As described below, there are separate enrollment periods for changing Advantage plans and dis-enrolling altogether.
People with ESRD may not be eligible for Medicare Advantage plans because their insurance generally must come from original Medicare. However, if you have an Advantage plan prior to developing ESRD, then you may be able to keep your plan. Those with ESRD should contact a plan administrator to determine eligibility.
Supplemental Insurance Options and Alternatives
If you’re still working and have work-based health insurance, then you may not need Part B coverage since your employer covers medical care related to routine visits. Almost everyone gets Part A for free, but Part B requires premiums and copays, just like regular, private insurance. You might question if you even need Medicare if you’re still working.
It’s still a good idea to enroll in at least Part A when you’re eligible because there may be penalty fees assessed later for enrolling outside of your initial window. Likewise, you might not get the coverage you need through your employer since some company policies change for employees who turn 65. Employer-based insurance may stop covering certain medical treatments and outpatient care once an employee qualifies for Medicare.
Additionally, those who need more coverage may find that Medigap offers the perfect solution. Medigap insurance is a type of supplemental plan that you can add to your existing Medicare coverage if you have original Medicare. Medigap covers costs that Medicare doesn’t cover, such as copays and deductibles, but there are a few things to keep in mind when considering a policy:
- You must be enrolled in Medicare Parts A and B to enroll in a Medigap policy.
- Medigap policies only cover one person; you have to buy an additional Medigap policy for your spouse.
- Medicare Advantage beneficiaries have to dis-enroll from their Advantage plans prior to obtaining a Medigap policy. You can’t have Medigap and Medicare Advantage at the same time.
- Medigap policies sold after 2006 cannot cover prescription drugs. If you need additional drug coverage, then you’ll have to enroll in Medicare Part D.
- You’re responsible for a monthly premium for Medigap in addition to your Part B premium. This additional premium is paid directly to the insurance company.
- If you buy a Medigap policy, then you’re legally allowed to renew it, even if you get sick. As long as you keep up with your premiums, your insurer cannot cancel your policy.
- Any insurer can sell you a policy as long as the company is licensed in your state to sell Medigap policies.
- If you have a Medicare Medical Savings Account Plan, then you cannot legally be sold a Medigap policy.
Since Obamacare created health insurance exchanges, you may be wondering if you can purchase a healthcare plan on a federal or state marketplace instead of enrolling in Medicare. In short, you may be able to get a marketplace plan if you meet certain qualifications. However, you cannot supplement your Medicare plan with a plan from the marketplace. If you have Medicare, then it’s illegal for an insurer to sell you a plan from the marketplace to supplement or replace your existing coverage. In order to take advantage of Obamacare, you would need to dis-enroll from your current Medicare plan entirely.
If you haven’t yet enrolled in Medicare, then keep in mind that you only have seven months to enroll initially. After this initial enrollment period, you’ll have to wait for the next open enrollment period to apply. In addition, you may be charged a penalty fee every month for as long as you have Medicare if you enroll during open enrollment instead of during your personal enrollment period.
Before you turn 65, research the pros and cons of purchasing a plan on the marketplace in lieu of Medicare. Once your enrollment period ends, you may not be able to get coverage for several months. And under the guidelines of the Affordable Care Act (ACA), you may also be assessed a penalty fee for not having major medical insurance during this time.
Medicare Costs and Premiums
How much will Medicare cost you per month? If you have limited income due to retirement or Social Security payments, then you may not have a lot of wiggle room when it comes to your monthly budget. Unlike government assistance programs, Medicare isn’t entirely free. Depending on the type of plan you choose, you could pay hundreds of dollars for medical coverage. Here’s an overview of some of the costs associated with Medicare.
- If you receive Medicare Part A automatically because of your Social Security benefits, then you won’t have to pay a premium for Part A. Likewise, if you paid Medicare taxes while you worked, then you will also be enrolled without a premium. These plans are referred to as “premium-free Part A.”
- For people who have to buy Medicare Part A insurance, the premium is based on how many work credits you’ve earned over the course of your life. The current maximum for Part A is $411 a month.
- If you’re younger than 65 and meet certain health conditions, then you also qualify for premium-free Part A coverage. For example, those with ESRD do not pay a premium for Part A.
- Nearly everyone pays for Medicare Part B insurance. The standard premium for new enrollees in 2016 is $121.80 a month. Next year, the premium could jump to $149 a month, but some people pay less due to the Bipartisan Budget Act of 2015. You can read more about the details on Part B premiums in our overview of 2016 costs.
- If you earn more than $85,000 as an individual or $170,000 as a couple, then you’ll pay a fee referred to as the Income Related Monthly Adjustment Amount (IRMAA). In other words, people who earn significantly more income will be assessed additional charges for medical coverage. The Medicare website offers a chart outlining these charges.
- Part D costs depend on a variety of factors, such as the type of medication you take, your plan’s individual policies and where you get your prescriptions filled. Likewise, Medicare Advantage plans will vary based on insurer and your individual needs.
There are programs and services available to help with the costs if Medicare is too expensive for you, including the following:
- Qualifying Individual Program (QI)
- Qualified Medicare Beneficiary Program (QMB)
- Qualified Disabled and Working Individuals Program (QDWI)
- Specified Low-Income Medicare Beneficiary Program (SLMB)
You can also enroll in the PACE program, which stands for the Program of All-Inclusive Care for the Elderly. PACE covers a variety of medical treatments and services offered through your community, rather than a nursing home or professional care facility. To learn more about options that could save money on premiums, start with the Medicare website.
Medicare Open Enrollment Periods and Penalties
You may be wondering if you have to sign up for Medicare at all. While this program is not required, there are plenty of benefits to enrolling. And if you do decide to sign up, it’s important to enroll when you can. If you’re over the age of 65 or suffer from a qualifying disability, then you will need to enroll in Medicare when you’re first eligible in order to avoid paying penalty fees for late enrollment. Penalty fees vary, but for Part B, the penalty lasts indefinitely.
For example, you might choose to forgo Medicare Part B when you’re first eligible because you have insurance through your employer. Once you retire and decide to take advantage of Part B, Medicare will assess a late enrollment fee every month for as long as you have Medicare – possibly for the rest of your life. No one can force you to choose a certain type of coverage. However, you should consider all of the variables before you decide against enrollment. The deadlines for Medicare enrollment are as follows:
- For Parts A, B and D, you have seven months surrounding your 65th birthday to enroll in original Medicare. This period includes the three months prior to your 65th birthday, the month you turn 65 and the three months following the month of your 65th birthday.
- General enrollment for original Medicare lasts from January 1 through March 31. You can enroll in Parts A and B during this period, but a late fee may be assessed, and coverage won’t start until July 1.
- In special circumstances, you may be able to enroll late without incurring a penalty fee. Special enrollment periods generally exist for people who lose job-based insurance or who were volunteering during the period of their initial enrollment. For detailed information on SEPs, visit the Medicare website.
- For Medicare Advantage plans, you need to enroll in Medicare Part A and Part B first. Initial enrollment for Advantage plans follow the same schedule as initial enrollment for original Medicare plans.
- If you want to dis-enroll from an Advantage plan, then you have from January 1 through February 14 to do so. If you dis-enroll from your Medicare Advantage plan, then you have until February 14 of the same year to enroll in a Part D plan for drug coverage.
- From October 15 through December 7, you can enroll in and make changes to your Medicare Advantage Plan. This includes switching from a traditional Medicare plan to an Advantage plan and vice versa. You can also use this period to sign up for, change or drop a Medicare Part D drug plan.
The bottom line is that you need to know what you want well ahead of your 65th birthday. That’s because Medicare enrollment can go by quickly, and there may be penalties for missing the deadlines. You’ll likely get a variety of advertisements from insurers regarding Medicare Advantage in particular. But don’t just settle for the cheapest option if you decide to get an Advantage plan. Choose a plan that offers the coverage you actually need. Otherwise, you may end up paying significantly more in out-of-pocket costs than the brochure promised.
Medicare and Social Security
You’ll notice on your pay stubs from work that a portion of your earnings goes toward funding Social Security and Medicare benefits. The two programs might seem interchangeable or at least closely related, but there are significant differences. In essence, Medicare is a government program that provides healthcare benefits to a limited demographic. You must be 65 or older; be younger than 65, but have certain disabilities; have children with certain disabilities; or suffer from a terminal illness, such as ESRD.
Social Security refers to a federal program that grants benefits based on need. These might include retirement benefits, survivor benefits or disability payments depending on situation. Your eligibility for Social Security depends on many factors, but primarily, work history determines the amount of Social Security you receive each month. On the other hand, Medicare is available to everyone who meets the parameters. Both programs are funded primarily through payroll taxes; both Social Security and Medicare have trusts set aside for payout purposes.
Additional Medicare Resources and Information
Our guide is meant to help answer some questions that you might have had concerning Medicare. But there are always exceptions to the rule when it comes to large-scale government programs. If you need additional information for an unusual situation or want to read more about the Medicare program, then you have options for conducting your own research.
Start by visiting www.Medicare.gov for eligibility requirements, deadlines and other information concerning your individual needs. To enroll in Medicare or apply for assistance, visit the Social Security Administration website for detailed instructions.
If you’re looking for more information on Medicare Advantage plans and other facets related to Medicare without visiting the Medicare website or Social Security Administration site, then you can check out the website hosted by the Centers for Medicare & Medicaid Services (CMS). This federal agency represents the U.S. Department of Health and Human Services (HHS) in its capacity to oversee the Medicare program. The CMS also administers Medicaid and the State Children’s Health Insurance Program (CHIP) in conjunction with individual states. You may also want to explore this website, HealthNetwork.com, for additional information about enrollment in Medicare Advantage plans.
By visiting the CMS website, you can access reports on various Medicare Advantage plans. That’s because the CMS conducts surveys of Medicare participants to help future beneficiaries make more informed decisions about their healthcare. The website also allows you access to a wide range of documents concerning rules and regulations within the health insurance industry.
Some people prefer to speak directly with a representative in person over visiting a website. If you’d rather talk to someone, then you can set up an appointment with your local Social Security office to learn more about Medicare and eligibility requirements or fill out a paper application. The Social Security Administration website makes it easy to find your local branch using the locator feature.
From here, you can also find the closest physical branch by ZIP code, look up additional ZIP code information or learn more about services outside of the United States. In lieu of visiting the website, you can also dial the SSA’s toll-free number at (800) 772-1213 for more information.
How Obamacare Affects Medicare
The Affordable Care Act has been changing the landscape of the American health care system since it took full effect in 2013. Also known as Obamacare, the ACA set forth a series of new guidelines and regulations related to the healthcare industry in the United States. We offer a full page of information on how the ACA affects Medicare, but we want to go over a few changes here briefly for your benefit.
In essence, Obamacare enhances your benefits under Medicare in a variety of ways; however, there may be additional costs associated with better protections and what the ACA calls “10 essential benefits.” The 10 essential benefits refer to medical treatments, like mental health care, outpatient services, yearly screenings and other preventive treatments. These are designed to give you better and more convenient healthcare options. Not everyone needs all of the benefits outlined by the ACA, but insurers have to offer them. This means that you may see an increase in your premiums if you opt for Medicare Part B or an Advantage plan. Other changes include the following:
- Medicare will now cover many more tests and services than it ever has before. This means you can expect more effective healthcare to prevent and treat a variety of age-related illnesses.
- For some beneficiaries, Medicare costs will decrease. Obamacare plans to cut Medicare spending by $716 billion over the next decade in order to reallocate those funds for better use. As a result, you may see lower out-of-pocket costs and other benefits.
- Obamacare will help make prescriptions more affordable by closing the Medicare Part D “donut hole” by 2020. In the interim, you may have access to features that help you cover the out-of-pocket expenses associated with prescriptions that fall within the donut hole.
The marketplaces or health insurance exchange websites have been set up to facilitate the insurance buying process. But keep in mind that you cannot use your state’s marketplace to enroll in or manage your Medicare account. In order to enroll in Medicare or make changes to your plan during OEPs, you still need to start with the SSA by visiting its website or contacting your local Social Security office to set up an appointment.
Know the (Medicare) Facts to Get Ahead
As you approach your 65th birthday, you’ll undoubtedly receive daily brochures and mailers concerning various Medicare plans from the Social Security Administration and private insurers. In order to make the best choice for your needs, spend some time actually reading these mailers to familiarize yourself with the jargon and costs associated with Medicare.
Conducting your own research through the Centers for Medicare & Medicaid Services and other online sources will help you gather objective information on plans and benefits. The more you know, the better prepared you’ll be when it comes time to sign up, change your policy or opt out of certain types of coverage.